Broc Romanek is Editor of CorporateAffairs.tv, TheCorporateCounsel.net, CompensationStandards.com & DealLawyers.com. He also serves as Editor for these print newsletters: Deal Lawyers; Compensation Standards & the Corporate Governance Advisor. He is Commissioner of TheCorporateCounsel.net's "Blue Justice League" & curator of its "Deal Cube Museum."
This blog by Steve Quinlivan gives us the latest about Corp Fin comments on revenue recognition disclosures under the FASB’s new standard – these comments were sent to Ford & Alphabet…
Tune in tomorrow for the DealLawyers.com webcast – “Activist Profiles & Playbooks” – to hear Jason Alexander of Okapi Partners, Tom Johnson of Abernathy MacGregor and Damien Park of Spotlight Advisors identify who the activists are – and what makes them tick.
SEC Approves NYSE’s “Proxy Submission” Change
Just in time for the heart of the proxy season, the SEC has approved the NYSE’s rule change – eliminating the duty of listed companies to deliver a hard copy of their proxy materials to the NYSE. Instead, the NYSE will rely on the company’s materials filed with the SEC.
Well, not quite. But we’re going to the “Wayback Machine” to remember this shareholder proposal from 1990 submitted by John Jennings “JJ” Crapo to the Bank of Boston. Corp Fin allowed the proposal to be excluded. And it was a humdinger. The proposal asked the company to allow any shareholder – who met the Rule 14a-8 ownership threshold – to place one or more director nominees on the ballot. So it was ahead of its time on the topic of proxy access. Albeit with a lower ownership threshold than anyone could imagine.
But the real joy with this thing is found in the “Supporting Statement.” It rambles quite a bit, with a little bit of everything in there for everyone. Annual medical and “emotional” fitness evaluations for each director. A question whether the board’s priest provides it with chaplaincy services. A push to have Desmond Tutu, Mother Theresa and Lech Walesa sit on boards.
Given the pervasiveness of mindfulness these days – for which I am a big proponent – my favorite is this excerpt from the “Supporting Statement”:
I do think of my relations, Godparents, former teachers, pastors, and friends and neighbors usually daily three to four hours. Friends, neighbors, and co-workers are more important than Family.
Thanks to Intelligize for making it easy to find this gem – and for their permission to post the no-action letter!
10-K Summaries: Not All the Rage
Tina Bacce & her colleagues at Troutman Sanders recently reviewed how many companies have taken advantage of Item 16 to the Form 10-K – the new item that “permits” inclusion of a summary in a Form 10-K. They looked at the Form 10-Ks containing Item 16 filed to date – all for Fortune 500 companies – and only two included a summary:
– Pfizer’s summary – it really is “Pfizer at a Glance” and consisted of a table of data that you might see in an annual report.
– 3M’s summary – appears to just call the hyperlinked table of contents a “summary.”
Don’t expect this “trend” to accelerate…
Was This “Interim Final” Rule More Final Than Interim?
Speaking of Item 16 of Form 10-K, Keith Bishop covers an interesting topic in this blog – did the SEC go to “final” for it’s Item 16 rulemaking already…
Despite a dose of drama when the SEC cancelled its open Commission meeting, the SEC released its 24-page interpretive release on cybersecurity disclosures in the early afternoon yesterday by seritim.
Here’s a statement by SEC Chair Clayton that indicates that Corp Fin will be reviewing disclosures to help decide whether further guidance – or rulemaking! – is necessary. And these statements by Commissioner Jackson & Commissioner Stein are a bit critical of the new guidance.
We’ll be posting the inevitable flood of memos about the guidance in our “Cybersecurity” Practice Area. I’m sure many will analyze the “duty to update” discussion in the guidance…
Our Coming “Cybersecurity” Webcast: Meredith, Keith & Dave!
Join us on Wednesday, March 14th for the webcast – “The SEC’s New Cybersecurity Guidance” – to hear WilmerHale’s Meredith Cross, Ropes & Gray’s Keith Higgins and Jenner & Block’s Dave Lynn discuss the SEC’s brand new cybersecurity guidance.
When is the SEC Required to Hold an Open Commission Meeting?
So the SEC approved this interpretive guidance by seritim rather than in the open Commission meeting context. Which really doesn’t matter – except the sudden cancellation of the open meeting made it feel like the guidance wasn’t coming out. The cancellation was probably related to another matter on the open meeting agenda – some liquidity rules that most of us luckily don’t care about. Read more in this blog about why the SEC isn’t required to hold an open meeting to approve rules or guidance…
Poll: Did Release of Cybersecurity Guidance Have More Drama Than the Olympics?
Just 90 minutes before the meeting was supposed to start, the SEC posted a simple note saying today’s open Commission meeting – which would have given us interpretive guidance on cybersecurity disclosure – has been cancelled. A few hours later, the SEC’s interpretive guidance was posted. I’ll be blogging about it manana…
I blogged a few weeks ago about BlackRock’s desire for a quota of two women on every board. I’m glad that BlackRock is advocating for two women on every board – but I’m sad that an investor has to advocate for such a thing as quotas at all. There should be more than two women on every board – but ideally it should happen naturally, just as gender diversity has happened in so many professions over the past 40 years or so. We’ll get there – but unfortunately it’s pretty clear that it won’t happen “naturally” as progress is moving at a glacial pace.
Anyway, Allen Matkins’ Keith Bishop told me about this bill recently introduced in California that would require at least three women on a board when the authorized number of directors is six or more. This bill would apply to public companies with their principal places of business in California, to the exclusion of the law of the state of incorporation…
The SEC’s Home Page Redesign: Mobile Friendly
As someone who studies site design (yes, I design all of our sites), I am always curious when the SEC redesigns its home page. It’s only been 2 years since the last redesign – and the prior redesign was four years before that.
The new design of the SEC’s home page is particularly suited for viewing by mobile devices. Since studies show that a majority of online traffic comes through mobile devices, it’s logical that the SEC would go this route. I changed the design of this site’s home page so it was optimal for mobile – and many folks weren’t happy so I reversed course & went back to the old design!
The SEC’s redesigned home page continues to cater to retail investors – as well as tout the new Chair’s objectives that he discussed in his first speech a few months ago. For those of us that rely on the SEC’s rules, regulations & guidance, the tabs at the top continue to be of the utmost importance…
Just Announced! The “Section 16 Forums”
In response to those doing Section 16 work who have told us that they want to network with those similarly-situated, we are holding two “Section 16 Forums.” Hosted by Alan, these are one-day events for all Section 16 practitioners – not just beginners.
I’m calling it a “crisis” because periodic problems continue to happen – and the SEC continues to provide very little (if any) transparency around what is going on with Edgar. The last time that I blogged about Edgar problems was October – when I heard that offerings were being delayed and there were fee problems. I heard about this from a number of members – but the SEC never said a word about it.
Now I’ve heard through the grapevine that the filing deadline for Schedule 13G amendments on Valentine’s Day caused some rough sledding for Edgar. Form 5s were due then too. Companies with 8-Ks, etc. couldn’t get their filings through on Edgar. Again, not a word from the SEC. Same story told in these old blogs: “Edgar is Down? (Crickets)” – or this one: “EDGAR is Down”: A Familiar Refrain?”
I’ve blogged about a simple solution for years – that the SEC launch an Edgar blog in which they indicate when Edgar is experiencing issues. And they then post follow-up blogs when the issues are resolved. Without this transparency, we are left to assume the worst. And given the high-profile hacking problems that the SEC has faced over the past year, you would think they would want to improve how they are perceived when it comes to handling this type of crisis communication…
Why am I so invested in this issue? Trying to save the SEC’s reputation I guess. Edgar is the most important asset that the SEC has – the market depends on it. And it’s ironic that this lack of disclosure is from an agency tasked with eliciting disclosure – not to mention that the SEC will be issuing guidance to companies tomorrow about how they should disclose hacks. And as John blogged recently, the SEC’s proposed budget seeks to boost its own cybersecurity resources…
Corp Fin Departures: Karen Garnett
Associate Director Karen Garnett has announced that she will depart Corp Fin after 23 years in the Division. No word yet on her next destination…
By the way, former Corp Fin Chief Accountant Mark Kronforst has joined EY’s National office in DC…
Transcript: “Tax Reform – What’s the Final Word?”
We’ve posted the transcript for the recent CompensationStandards.com webcast: “Tax Reform: What’s the Final Word?”
Perhaps a long time coming, as noted in this Sunshine Act notice, the SEC will hold an open Commission meeting on Wednesday to issue an interpretive release providing cybersecurity disclosure guidance. The last cybersecurity guidance came from Corp Fin – not the Commission itself – back in 2011. Just this week, Commissioner Stein delivered a speech noting that current cybersecurity disclosure from companies was insufficient.
Not sure of the source & accuracy of this article, but the “SD Times” seems to know what will be in the interpretive guidance. Here’s an excerpt:
The updates are expected to take effect in the first and second quarter of this year, and it will require that investors are notified of all data breaches, instead of only notifying them of major cyber attacks.
The new update will include rules about sending timely breach notifications to senior management. Secondly, the upcoming guidance is expected to address how firms should disclose cybersecurity events that represent a material risk to their investors. In addition, it will provide information on how firms can create a blackout to prevent insider trading following a cybersecurity event.
Kyle Moffatt Named Corp Fin’s Chief Accountant
Yesterday, Corp Fin announced that Kyle Moffatt would be the Division’s Chief Accountant. Not surprising given that Kyle has been serving in that capacity since Mark Kronforst left last month.
Transcript: “Alan Dye on the Latest Section 16 Developments”
We have posted the transcript for the recent Section16.net webcast: “Alan Dye on the Latest Section 16 Developments.”
Recently, in this blog, John did a great job bringing back memories of the 1987 stock market crash – the largest single day drop in Wall Street’s history. Here’s my own personal story about it:
I was in law school on a field trip to the Philadelphia Stock Exchange that day. The head of the Exchange spoke to us and started crying. He said that everyone in the building had lost millions. Being a pauper myself – and having had a few drinks with my law school buddies on the train up there – I couldn’t relate.
A year later, I was working at the SEC – and the agency sponsored a HUGE keg party for the “Market Break” anniversary at a local bar. I thought the SEC would be routinely sponsoring keg parties at bars. That was the last of them…
Here’s other stories of the ’87 crash from some old-timers:
– I was just an associate and, fortunately, did not have much money in the market. However, when I was leaving for the day, a senior corporate partner advised me, “Don’t walk too close to the buildings. There may be people jumping.” I believe he was serious.
– I had taken the day off to take my daughter (who was about 20 months old) to the Bronx zoo. Didn’t see a TV or a radio until I got home. My doorman said he was ruined and could never retire!
– I was in a drafting session for an IPO that was being led by Smith Barney and Needham & Co. Because this was before the days of mobile phones and other handheld devices – and before 24-hour cable financial news shows – the bankers would periodically walk out of the room to call back to their offices and find out how bad it was. Their faces grew longer as the day wore on. The company went public two years later.
– I was working on a leveraged ESOP deal as an ERISA lawyer in Charlotte. I had just signed the preceding Friday a contract for a house in the Hamptons. When I got back to NYC I rushed off the plane (with everyone else) to see if the world as we knew it had ended. The next day we backed out of the Hamptons contract, without taking any loss. And the next week, my wife and I decided that New York was going to get ugly, which it did. That was the start of our 3-month decision making process to change my specialty – and to move to Palo Alto. Funny how bad can turn into all things good.
– I had just entered private practice and was new to both doing deals and buying stocks in my meagerly funded retirement account. All day long frantic co-workers were announcing the next new market low, and as the public offering I was working on fell apart, I wondered who in the world was on the buy side of all those trades. When I got home that night, I collapsed onto my apartment sofa to watch the market news on TV and noticed that the light was blinking on my answering machine (one of those clunky tape recorders everyone connected to their telephones at the time). My sole message was from the broker handling my IRA, informing me that a limit order to buy a particular stock that I had placed nearly two months earlier and had since forgotten about had been executed that morning at $19 a share. The stock closed that day at just over $12. The whole experience was sobering.
– I had left the night before on a flight to Europe to close a stock-for-stock acquisition of a privately-held business for a public client. As the stock plummeted during the day, the seller refused to close. The client and I hung around for another day to see if it would recover, but ended up heading home when it did not. A few weeks later it had recovered enough to close.
Here’s the intro from this WSJ article by Dave Michaels and Andrew Ackerman:
Scott Garrett, a former Republican lawmaker known for criticizing what he considered government overreach by Wall Street regulators, has landed a senior role at the Securities and Exchange Commission. Mr. Garrett, 58 years old, plans to take a position advising SEC Chairman Jay Clayton, according to people familiar with the matter. The job would represent a second act for Mr. Garrett, whom U.S. senators rejected last year as a pick to lead the U.S. Export-Import Bank under the Trump administration.
The hiring is a rare instance of a former lawmaker joining a federal agency in a staff role. Mr. Garrett, first elected to Congress in 2002, lost a re-election campaign for his northern New Jersey House seat in 2016. As a lawmaker, he routinely questioned the SEC’s regulations and priorities during the Obama administration.
Poll Results: Do You Care If the SEC Shuts Down?
A few weeks ago, the government shut down – but the SEC stayed open. Back then, I conducted a poll about whether folks cared if the SEC was closed.
– 47% said they wouldn’t notice
– 32% said they would take an early nap
– 8% said they’d call a lawyer
– 7% said they wouldn’t be able to sleep
– 6% said they’d drink themselves into a stew
Although a deal in Congress is brewing to avoid another shutdown at midnight tonight, it’s still possible that a deal won’t happen. There isn’t a note on the SEC’s home page yet about what would happen then – but I imagine the situation is like a few weeks ago. That the SEC has enough funds to keep the lights on for a “limited” amount of time…
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– SEC Continues to File Amicus Briefs in Support of Its “Whistleblower” Definition
– Halliburton: Eighth Circuit Upholds “Price Impact” Rebuttal of Rule 10b–5 Reliance Presumption
– Board Seats: “Reverse” Board Searches
– Why I’m So Passionate About Omnicare
– Must Directors Follow Company Policy on Shareholder Communications?
As noted in this Reuters article, the Council of Institutional Investors has sent this letter to Corp Fin objecting to its recent no-action decision allowing AES Corp to exclude a shareholder proposal on the threshold required for investors to call a special meeting.
CII claims that AES is gaming the no-action process to exclude a shareholder proposal that typically receives substantial investor support — and urges the SEC to revisit its approach to Rule 14a-8(i)(9)(the “directly conflicts” exclusion basis) – so that it is more consistent with the language & intent of the underlying rule. CII says that AES’s reasoning is reminiscent of the argument that Whole Foods used in ’15 to exclude a shareholder proposal about proxy access. That ultimately prompted a Corp Fin review that led to Staff Legal Bulletin No. 14H as the appropriate guidance for determining the scope of Rule 14a-8(i)(9). Also see this Cooley blog…
More on “Mandatory Arbitration: Will the SEC Give Corporate America a Gift?”
Last week, John blogged about that the SEC may be open to revisiting the permissibility of bylaws requiring investors to arbitrate their claims against public companies. As noted in this article, investors are expressing angst about this possibility. CII sent a letter to the SEC about this topic too…
Tomorrow’s Webcast: “Auctions – The Art of the Non-Price Bid Sweetener”
Tune in tomorrow for the DealLawyers.com webcast – “Auctions: The Art of the Non-Price Bid Sweetener” – to hear McDermott Will’s Diego Gómez-Cornejo, Alston & Bird’s Soren Lindstrom and Western Reserve Partners’ Chuck Aquino discuss how non-price bid sweeteners move the needle with private sellers in competitively bid deals.
